By

Brenton Smith

This is a theore,cal ques,on which will generate more than one answer. Here is the
background, and you will have to decide for yourself.

Research from the SSA

Originally in 1983, the reasoning to jus9fy taxing half of the benets collected was:

The idea was based on the simple no,on that the employee had made
only one-half the contribu,ons used to fund his benet (the other half
having been paid by the employer). Since in private pensions, benets in
excess of the employee's own contribu,ons are taxable, one could argue
that 50% of Social Security benets should be subject to taxa,on.

~ hNps://www.ssa.gov/history/taxa,onoQenets.html

That posi9on was revised in 1993:

In 1993, SSA's Oce of the Chief Actuary es;mated that the payroll tax
contribu;ons of current and future workers would equal less than 15 percent
of the present value of their life;me benets (Goss 1993).

~hNps://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html

In other words, Social Security was a good deal in 1993. The problem with this approach is that
this ra,o changes over ,me, and varies person to person. In this case, the people who pay the
tax generally pay a lot more than 15 percent for their future benets.

This posi9on is even more complicated though because the self-employed:

The worker's employer pays an equal amount, which is a tax-deduc,ble

business expense. Self-employed workers are liable for the full 12.4 percent
payroll tax, but they are eligible for two tax deduc,ons: They may reduce
their net earnings from self-employment by half the amount of the Social
Security payroll tax, and they can deduct half of their Social Security tax from
 personal income reported on IRS Form 1040. The payroll tax deduc,on is a
factor in determining AGI (SSA 2015a).

~hNps://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html

In my opinion

Social Security benets are old-age insurance. As such, taxing seniors benets makes about as
much sense as paying taxes on an insurance check that one receives for an auto wreck. That
insurance money tends to pay for the unexpected cost of repairing the car. Social Security
checks pays for the costs that are incurred simply by living in old-age. This is not a situa,on
where the seniors are making money.